Saturday, July 19, 2008

Concisely Painful Economic Forecast

I'm sure it'll be blogged to death, but the NY Times' Uncomfortable Answers to Questions on the Economy is really, really good. And not in its positive outlook, but in its format. Simple questions, concise yet broad answers. What the average person really wants to know about what the hell is going on out there, but was afraid to ask.

Is This a Recession? Who knew some private institution was the semantic god of the big "R" word, no wonder economists are arguing over are we or aren't we ad nauseum. So the Economic Bureau of Economic Research says no, most others say yes. The article breaks down why.

How Bad is Housing? The article is fantastic when it talks about housing. They break it down, and the gravitational free fall isn't over yet. Economists expect another 10-15% drop in housing prices, and there's currently enough homes on the market to satisfy 2+ years of demand, without ever having to build another. I'm no real estate guru, but that sucks tailpipe.

When Will Banks Revive? $300 billion in write offs with an expected ceiling of $1 trillion. Those numbers are so off the charts they mean nothing to me. Other than someone made a $h*tload of money f@ck*ng up. Again, the article does a short and sweet breakdown, but you read stuff like that and you just want to go out and kick some banker butt.

Is My Job Safe? It aint over 'til the fat lady sings, and she's not even warming up yet. We're workers in an economic Jenga, and pile that on with wallet busting gas prices, 5% overall inflation, lower wages-- it's a bleak picture. That said, "only" a few hundred thousand more workers will lose their jobs. “In every dimension, people are worse off than they were,” said Mr. Roubini, the New York University economist. In a market of millions, cross your fingers and hope your job has nothing to do with the housing market.

Are Consumers Done? and the last question, an American favorite, Who's to Blame? This is the part that's horrifying. Consumer spending counts for nearly 70% of all economic activity. Are ya kidding me?? My take is, you can't have your cake and eat it too. I don't care where you got your MBA from. You can't feed the American consumer indigestible food, watch them puke it up, and blame them for the mess. Look, obviously as a PF blogger I have my issues with those who spend beyond their means. But get real. The blame goes high and low, and pretty much nobody is unscathed. And that's the part of the article most painful. Yes, we all did this to ourselves, but we sure had some help along the way.

Thursday, July 17, 2008

What I'm Not Cutting

Inspired by a CNN/Money article Where Americans Will (and Won't) Cut Back, I decided to take a look at what's on my chopping block.

Consumer confidence is in the gutter, inflation is on the rise and the economy is struggling. But even as consumers cut back on spending, there are some things they refuse to give up.

Nine out of 10 Americans said they are cutting back expenses or discretionary spending at least somewhat because of the current economic conditions; according to a recent study from market research firm GfK Roper Consulting.

And moi? Well, I guess since I'm in the upper coast of Maine, vacation is one category that's not getting cut. But to be fair, M and I save a little every month to be able to go away once a year or so. But flying to dollar depressed countries (ie anywhere in Europe) is going to be put off for a while.

Eating out also isn't on the chopping block, though like eating through the pantry it's one of those theoretical eliminations that never seem to become reality. The reality is that I eat out for less money. No more spontaneous meals at Al di La, it's more like the local taqueria.

Some things are on the chopping block. Driving for the hell of it. Buying new clothes. Buying gadgets. Buying lots of books (though I still buy some, I'm not blowing $100 at the Strand- I'm setting one book limits which for the first time I actually adhere to). And saving.

Yes, saving more money is on the chopping block. Even though I would love to save even more pennies than I already do, and pretty much every year I try to increase it a little, this year I wasn't able to increase it as much as I would have liked to.

And what I'm not doing? I'm not one of the 50% of Americans buying a new HD/flat screen TV within the next year. Other things the article sited as things Americans are loathe to cut right now are cable/satellite TV subscriptions, vacationing and travel. It's alright, I never thought I'd see the day Americans would be conscious of fuel efficiency. Then again, I was just a kid during the last energy crisis.

Monday, July 14, 2008

The Oh $h*t Fund

Sometimes things happen that make me think thank god I have a savings account, that if I didn't have a cushion, no matter how small it may seem, the most insignificant fall could have ended up breaking a bone. Instead, I just got a good internet workout with my ING account.

Saturday morning M and I left Brooklyn for a three week vacation (!!). I won't bore you with the details, but essentially a large purchase for M's work went on our credit card right before the card's monthly statement ended. This meant that the check reimbursement from work would not come until a few weeks after the payment was due. While we were away on vacation. On top of that, my freelance check would also come in-- you guessed it-- while we were on vacation. I guess the old me would have paid some smidgen over the minimum payment on the credit card, canceled the automatic IRA investment that happens on the 15th of every month, and just gone into a rationalized debt for the sake of a few weeks of summer vacation.

Okay, maybe this doesn't count as an emergency. But sometimes calling something an Emergency Fund is a little more alarming in name than what life throws at us. So I transferred some money from our aptly labeled ING Vacation Fund and Emergency Fund into our respective accounts and will enjoy vacation free from the stress of what is going on in our bank accounts. When we get back and deposit our checks I'll just transfer the money back into the ING accounts. Because you never know when the next oh $h*t moment will happen.

And that's just one way I avoided 7 Surefire Ways to Stay Poor

Tuesday, July 1, 2008

Back From The Hiatus with Endless Random Thoughts

Wow, it's been a while since I've really posted. Thanks for all the kind words, things worked out in the end. M's great uncle got sick and things took a rapid and surprising turn for the worse. He passed away, but it was for the better if such things could even be possible. I guess modern medicine makes it possible, with the opportunity to live longer there's always a question of quality of life. On a selfish level I may wish the old guy was still here so I could kick his ass in cards, but honestly he was more than ready, and openly said so. I lived a good life, quote unquote. I hope that when the day comes for me I can say the same.

Then I went home to Buffalo for a while to visit my family, and I had a talk with my mom about her impending death, which she seems to bring up repeatedly despite being in fine health and a hair above a youthful sixty years old. I also moved my sister into a new apartment, and her money woes frankly just make my head hurt.

Being away from the city and my day to day life these past few weeks made me think a lot about money. I know I obsessively save, not in large amounts but with a certain consistency, and I read a lot of bloggers' paths to the long road to retirement as well. But from the struggle to get M's great uncle proper medical care, to my mom's sincere freak out over the gyrations of the stock market and her own retirement right around the corner, financial planning is no joke. There is a very real end of the road, and a reason why we do these things to begin with; live below our means, save, plan for retirement.

Sure, I'd love to have a Prius. I can even rationalize that to have a short car loan will boost my credit score. And driving around for a thousand miles before I fill the gas tank sure sounds like more fun than pouring money into my Roth IRA that keeps on sinking like the damn Titanic, but this choice is a privilege. How so?

Take my childhood, for example. Working class family below the poverty line before Reagan bumped it up. Not consumers, by any stretch of the imagination, there simply was no money. Also, not savers, no 401k, etc. Fast forward into my adulthood, when my mom finally gets a retirement plan from work, into which she diligently saves. But there's a lot of lost time that can't be made up, so I know that when she's watching the Dow she is really really worried, and I'm worried for her.

And me? I'm a consumer. I save, sure, but it comes from the money allocated for my consumerist ways (aka disposable income), and I could always save more, no matter what I say on this blog. That's the difference. Nowadays we are a nation of consumers, and we have thousands of dollars of credit line(s) to keep up the habit. So that privilege I was talking about before? The privilege is not in the decision to save, it's in the decision to spend.

In the end- nobody's perfect, I know I'm not exactly giving up my material goods for a higher cause any time too soon. But there has to be some middle ground, and if I never laid out what it took to retire like a normal person, then I might have never found that middle ground. Because I will always lust after things like a Prius...